Your Funding Options

September 05, 2017

It’s never an easy decision to move into a Residential Aged Care. The need can come unexpectedly, at an untimely moment and with a great deal of urgency. Adding to the stress of this emotionally charged situation is the challenge of coming to terms with the complexities of aged care funding and a vocabulary of new terminology.

That’s why we recommend that you call us and speak with one of our friendly experts who would be happy to explain things, answer your questions and help you through the process so that your experience is easy and quick as possible. Just call us on 1800 632 314.

We’ve also put together this summary of how Residential Aged Care funding works so that you have a reference to come back to.

How the finances work

The costs associated with residential care can vary depending on the home you’re applying for and your individual circumstances. The Government Asset and Income Assessment will determine if you’re eligible for any subsidies, or if you have the means to contribute to the cost of your care. If you choose not to have an assessment, the maximum charges will apply.

There are five main types of fees you may pay for Residential Care: 1. Accommodation cost 2. Basic daily fee 3. Hotelling contribution 4. Non-clinical care contribution 5. Higher Living fees

Each of these costs is covered in more detail below and on the following page.

1. Accommodation Cost

This covers the cost of your accommodation including amenities, such as lounge rooms and gardens, as well as maintaining and improving the home. There are a number of ways you can choose to pay for your accommodation.

Option 1:
Refundable Accommodation Deposit (RAD)

A RAD is a single, lump sum payment, in the form of a loan, that is refunded to you or your family when you leave the home, subject to any outstanding fees and any retained amounts. Under this arrangement we will retain 2% of the RAD per year (for up to 5 years, to a maximum of 10%). This amount will not be refunded when you leave care. The remaining balance of the RAD will be refunded to you or your estate.

Option 2:
Daily Accommodation Payment (DAP)

A DAP is a recurring payment that accrues daily and is payable fortnightly. It’s calculated using the Maximum Permissible Interest Rate (MPIR), which is set by the Government. A DAP is not refundable.

DAP amounts are indexed twice yearly (on 20 March and 20 September), so the daily amount may change over time. Indexation does not apply to daily accommodation contributions (DAC) paid by residents eligible for government assistance with their accommodation costs.

Option 3:
A combination of RAD & DAP payments

You can choose to pay a combination of RAD and DAP. Your DAP will decrease because you’ve paid some money up front with your RAD payment. You can choose the % amounts of your RAD and DAP payments. For example, you could choose to pay a single, lump sum payment that is 60% of the RAD. The balance owing (40% of the RAD) would be covered by a daily, non-refundable payment (DAP).

Option 4:
Pay your DAP as a draw down from your RAD

You can choose to pay your DAP out of your RAD contribution. The fortnightly DAP is charged against the RAD balance held and adjusted for interest. When you leave the home, the RAD you paid will be refunded, less: (a) any DAP amounts that have been drawn down, (b) any agreed fees or charges, and (c) any legislated retention amounts.

As a new resident, you have 28 days to choose your payment method. If this time expires and you haven’t chosen a payment method, you’ll be charged the DAP.

After you’ve signed the contract, you can still change your mind about how you’d like to pay within 14 days. You can also change your payment from a DAP to a RAD at any point during your residency but you can’t change from a RAD to a DAP.

2. Basic Daily Fee

The basic daily fee covers your day-to-day living costs such as electricity, cleaning, laundry and meals. It also covers the home’s operating costs, such as rates and taxes, insurance, hiring and training staff, administration, property management, pest control, lifts (where applicable) and air conditioning in common areas. The basic daily fee is set by the Government at 85% of the Centrelink single Age Pension, regardless of whether or not you receive the Age Pension.

3. Hotelling contribution

People who can afford to will contribute more by way of the hotelling contribution. This is a means-tested daily amount that helps cover everyday living costs such as meals, cleaning, laundry and shared services. If payable, the amount is determined through an income and assets assessment.

4. Non-clinical care contribution

If you are assessed as paying the maximum hotelling contribution, you may also be required to pay a non-clinical care contribution. This contribution helps to fund personal and social care supports. Clinical nursing care continues to be fully funded by the Government and is not charged to you.

5. Higher Everyday Living Services (Optional Fees)

Some services and supplies such as hairdressing and beauty services, newspaper deliveries, private internet, private telephone, private pay TV in your suite, optional therapy services and pharmaceuticals are not included in your standard daily living and care arrangements.

You may choose to purchase extra personal or lifestyle services. If you would like to receive higher-level everyday living services beyond the standard living and care services that are already included in the fees above, you may be offered an optional Higher Everyday Living Fee (HELF). Choosing not to pay the HELF does not affect your eligibility to move into or remain living in the home.

6. Payment of fees

Your fees will be charged to you in advance, by direct debit from your bank or other financial institution. The payment is processed fortnightly and we’ll send you a monthly fee statement. We’ll also provide you with a statement showing your RAD balance once a financial year, with the audit statement, or if we receive a request from you. We’ll write to tell you about any significant change in fees and to explain the reason for the change and how the fees have been calculated. If you’re away, or have a stay in hospital, you’ll still need to pay your fortnightly fees. If you’re behind in paying your fees by more than one month, you’ll be charged interest on the amount you owe, at the interest rate defined by the Aged Care Act. If we need to pursue the normal legal avenues to recover the amount you owe, you may also be charged for the cost of recovery. If you’re behind in paying your fees by more than 42 days, and it’s within your ability to pay them, then we may ask you to leave the home. If your actual income is inadequate to pay your fees, the Aged Care Act allows for a hardship reduction. You’ll need to apply to Services Australia to receive this financial hardship reduction.